Tutorial 4 & 5

Question 10

10) Malang Bhd has recently suffered huge losses in the last 2
years. The value of the companys shares has been falling over
the last year and the directors are worried that it may continue
to slide downwards. In view of this, the directors seek your
opinion on the following matters:
(a) In order to prevent a further decline in the value of its

shares, can the company purchase its own shares?

According to S67(1) a company cannot buy its own
shares.
Exception S67A a public company may buy its own shares
if:
it is authorized by the Articles of Association.
it is solvent at the date of the purchase.
the purchase is made through the Stock Exchange.
the company inform CCM and the Stock Exchange within
14 days and the purchase is made in good faith and in the
interest of the company.

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(b) The directors inform you that the value of the companys
shares are not backed by its existing assets. Can the company
reduce its share capital? What is the procedure required?
Section 64 provides that a company can reduce its share capital if:
a) The Articles of Association allows it.
b) A special resolution is passed.
c) Approved by the court.
)
When the court is requested to approve a share capital reduction:
1. The court will consider whether the creditors would be prejudiced by the

reduction.
2. The court will make sure the reduction is fair to all members and also
consider the public interest.
3. The court may approve the reduction and impose conditions as it thinks fit.
4. The company must lodge a copy of the court order with the CCM within 14
days.